Tax benefits to gain employees and workers for Italy

published on July 18, 2019 | reading time approx. 4 minutes

In order to support the economic, scientific and cultural development of the country, the Italian tax authorities provide numerous benefits for people who move to Italy. Some of these favoring measures have been in force for several years, while others have been issued recently. All of them have the common aim of attracting human resources to Italy.

 
Regarding workers who decide to move to, or to return to Italy, also known as “repatriates/ impatriati”, the Italian tax system provides for a preferential tax regime, which has been recently expanded and strengthened. After the latest changes introduced by the so-called “Growth-Legislative-Decree” (Legislative Decree No. 34/2019), the exemption from tax for the labor income produced in Italy is increased from 50 to 70 per cent for taxpayers eligible to receive the benefit. In addition, the number of eligible beneficiaries has been significantly expanded to include individuals who do not have a university degree and/or who do not hold management positions. This is a novelty of significant importance, for example for the world of professional athletes or artists.

• Characteristics of the benefit

• Conditions for applying the provision

• The case of athletes and artists

Characteristics of the benefit

With the changes introduced to the existing “repatriates/impatriati” regime referred to art. 16 par. 1 of the Legislative Decree No. 147/2015, a tax exemption of 70 per cent is provided to the labor income produced in Italy from persons – Italians or foreigners – who transfer their residence to Italy pursuant to art. 2 of the T.U.I.R (Italian Income Tax Act). The benefit lasts five years and is applicable to persons who transfer their residence to Italy starting from 1 January 2020. The exemption is raised to 90 per cent for those who transfer their residence in the regions of Abruzzo, Molise, Campania, Apulia, Basilicata, Calabria, Sardinia and Sicily. 

• If the worker has a minor or dependent child- also in pre-adoptive foster care;
• If the worker acquires a residential property in Italy after the transfer to Italy or in the 12 months preceding the transfer. The residential property can be acquired directly by the employee, his/her spouse or partner or by his/her children (also co-ownership).

During the extended period for a further five years, “only” 50 per cent of the income is included in the taxable income. Whereas, if the employee has at least three children under the above-mentioned conditions, the taxable income is reduced at 10 per cent (exemption of 90 per cent).

Conditions for applying the provision

• have not been resident in Italy in the two tax periods preceding the transfer and commit to reside in Italy for at least two years, and
• work mainly in Italy.

 
It is specified, that employees, self-employees and recipients of incomes similar to salaried work (a category which was previously already included by practice) may benefit from the scheme. With the new wording, the scheme is also extended to persons who perform directly in person an entrepreneurial activity in Italy.

 
It is also provided that persons who were never registered with “AIRE” (remaining, therefore, registered in the registry of the resident population) provided that they have resided in another State pursuant to a Convention against double taxation on income, may also qualify. This provision is introduced in order to prevent to exclude from the regime those persons who, despite of having substantially transferred their residence abroad, are still to be considered resident in Italy pursuant to Article 2 of the T.U.I.R. for having forgotten to be removed from the registry office of the resident population.

The case of athletes and artists

Unlike the previous provision, the new one has a broader scope, as it does not provide limitations regarding the type of work carried out or the level of education required. Therefore, persons who do not hold a university degree and/or who do not hold managerial positions may also have access to the benefit. The new provision, as extended, could be very attractive for athletes and artists who decide to move to Italy.

 
For example, the income from employment includes also the compensation received by soccer players from their clubs for their sporting performance – in the same way should also be treated the compensation with regards to image rights if it is granted together with the remuneration for the sporting performance. However, it should not be forgotten that the proceeds from the later activity could also qualify as “other income” pursuant to art. 67, par. 1, letter. l of the Italian Income Tax Act, if the soccer player decides to exploit his own image rights independently from the sporting performance (e.g. by assigning the image rights to a sponsor or an image management company). In this case, the tax benefits of the new regulation would not be applicable.

Further, the tax benefits also apply to artists – such as singers and actors who carry on their activities autonomously, with professionalism and habituality as required by art. 53 of the Italian Income Tax Act. For these categories, the income deriving from the exploitation of image rights may constitute income from self-employment, within the scope of the “repatriates” scheme, if these rights are in some way attributable to the profession exercised. In this case, art. 54, par. 1-quater of the Italian Income Tax Act is applicable, according to which: “the fees received for the transfer of intangibles related to artistic or professional activity should be considered as part of the income” (Resolution No. 255/E of 2 October 2009).